[Federal Register Volume 63, Number 232 (Thursday, December 3, 1998)]
[Rules and Regulations]
[Pages 66720-66721]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-32127]


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DEPARTMENT OF AGRICULTURE

Grain Inspection, Packers and Stockyards Administration

9 CFR Part 205

RIN 0580-AA63


Clear Title--Protection for Purchasers of Farm Products

AGENCY: Grain Inspection, Packers and Stockyards Administration, USDA.

ACTION: Final rule.

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SUMMARY: This document amends regulations relating to the establishment 
and management of statewide central filing systems as they pertain 
specifically to the filing of ``effective financing statements'' for 
``farm products'', as defined in section 1324 of the Food Security Act 
of 1985 (7 U.S.C. 1631), to allow a continuation of an effective 
financing statement to be filed without the signature of the debtor 
provided State law authorizes such a filing. This rule responds to 
comments received when the regulations were previously amended by a 
final rule published on April 1, 1997 (62 FR 15363) that brought the 
regulations into conformity with statutory amendments found in Sections 
662 and 663 of the Federal Agriculture Improvement and Reform Act of 
1996.

EFFECTIVE DATE: January 4, 1999.

FOR FURTHER INFORMATION CONTACT: Gerald E. Grinnell, Director, 
Economic/Statistical Support, Grain Inspection, Packers and Stockyards 
Administration, (202) 720-7455. Kimberly D. Hart, Esquire, Trade 
Practices Division, Office of the General Counsel, (202) 720-8160.

SUPPLEMENTARY INFORMATION:

Background

    Section 1324 of the Food Security Act of 1985 (7 U.S.C. 1631) (the 
Act) provides that certain persons may be subject to a security 
interest in a farm product created by the seller under certain 
circumstances in which a lender files an ``effective financing 
statement'' with the ``system operator'' in a State that has a 
certified central filing system as defined by the Act. The Act requires 
the Secretary of Agriculture to prescribe regulations ``to aid States 
in the implementation and management of a central filing system.'' 
Final regulations were published on August 18, 1986 (51 FR 29450).
    The Secretary's authority and responsibility under the Act is 
limited to certification of the State central filing systems and to 
prescribing regulations to aid in the implementation and management of 
certified central filing systems. The Act does not give the Secretary 
the authority or responsibility for such matters as direct notification 
by secured parties, sales of and payment for products, procedures for 
payment or procedures for personal liability protection. Those matters 
are governed by State law.
    Prior to the 1996 amendment of the Act, lenders could not file 
effective financing statements or amendments to those statements 
electronically with State certified central filing systems because such 
statements were required to bear the signature of the debtor, which 
could not be transmitted electronically. Commercial lenders also 
expressed concern and confusion due to the vagueness of the provisions 
for effective financing and continuation statements contained in the 
Act and the inconsistency between the Act and the Uniform Commercial 
Code.
    Section 662 of the Federal Agriculture Improvement and Reform Act 
of 1996 (Pub. L. 104-127) (hereinafter the ``FAIR Act'') amended the 
Act to allow lenders to file ``effective financing statements'' by 
electronic transmission without the necessity of obtaining the 
signature of the debtor provided State law authorizes such a filing.
    The Department published interim and final rules in the Federal 
Register to implement the FAIR Act amendments (61 FR 54727 and 62 FR 
15363, respectively). The rule allows electronic filing of amendments 
to effective financing statements without the signature of the debtor. 
Comments received in response to the rule encouraged the Department to 
further amend the regulations to allow the filing of paper continuation 
statements without the signature of the debtor as well. Section 
205.209(d) of the regulations (9 CFR 205.209(d)) currently provides 
that continuation statements are to be treated in the same manner as 
amendments to effective financing statements. Therefore, the rule 
implementing the 1996 FAIR Act amendments allows continuation 
statements to be filed electronically, without the signature of the 
debtor as well. However, because the purpose of that rule was to bring 
the regulations into conformity with the 1996 amendment (which 
addressed electronic filings), the final rule did not address the 
commentors' request to eliminate the signature requirement for paper 
continuation statements.
    The Department published a proposed rule in the Federal Register on 
June 8, 1998 (63 FR 31130), which would remove the requirement from the 
regulations that a filing of a continuation to an effective financing

[[Page 66721]]

statement bear the signature of the debtor. Section 1324 of the Food 
Security Act of 1985 does not require that continuation statements be 
signed. This rule will make it easier for lenders to file continuation 
statements because lenders would no longer be required to obtain the 
signature of the debtor. This rule will also simplify the filing of 
lien notices by bringing the regulations for central filing systems 
into conformity with Article 9 of the Uniform Commercial Code, which 
covers non-farm products.

Comments Received

    Only one comment was received in response to the proposed rule. The 
commenter, an association purporting to represent more than 200 farm 
credit institutions throughout the United States, fully supported the 
proposed rule because the change would make it easier--and therefore 
less costly--for lenders to file continuation statements. The commenter 
also stated that it would simplify filing of lien notices by bringing 
the regulations for central filing systems into conformity with the 
Uniform Commercial Code.
    After review of the proposed rule and the comment received, we have 
determined that the proposed rule as published at 63 FR 31330 will be 
adopted as the final rule.

Compliance With Regulatory Requirements

    As set forth in the proposed rule published at 63 FR 31130, this 
rulemaking was reviewed under and is issued in conformance with 
Executive Order 12866, Civil Justice Reform (Executive Order 12778), 
and Regulatory Flexibility Act and Information Collection requirements. 
The information collection and recordkeeping requirements for 9 CFR 
Part 205 have been previously approved by the Office of Management and 
Budget under control number 0580-0016.

List of Subjects in 9 CFR Part 205

    Agriculture, Central filing system.

    For reasons set out in the preamble, the Grain Inspection, Packers 
and Stockyards Administration is amending 9 CFR Part 205 as set forth 
below.

PART 205--CLEAR TITLE--PROTECTION FOR PURCHASERS OF FARM PRODUCTS

    1. The authority citation for Part 205 is revised to read as 
follows:

    Authority: 7 U.S.C. 1631 and 7 CFR 2.22, 2.81.

    2. Section 205.209 is amended by revising paragraph (d) to read as 
follows:


Sec. 205.209  Amendment or continuation of EFS.

* * * * *
    (d) An effective financing statement remains effective for a period 
of 5 years from the date of filing and may be continued in increments 
of 5-year periods beyond the initial 5-year filing period by refiling 
an effective financing statement or by filing a continuation statement 
within 6 months before expiration of the effective financing statement. 
A continuation statement may be filed electronically or as a paper 
document, and need not contain the signature of the debtor.

    Dated: November 24, 1998.
James R. Baker,
Administrator, Grain Inspection, Packers and Stockyards Administration.
[FR Doc. 98-32127 Filed 12-2-98; 8:45 am]
BILLING CODE 3410-EN-P